Twelve months ago, few could have foreseen the pandemic that would come to dominate 2020. As the year draws to a close, COVID-19 continues to bring widespread disruption to people and businesses around the world – and it is likely that this will continue well into 2021.
For corporate treasurers, the challenges of the past year have been extraordinary. Lockdown conditions have forced entire treasury teams to adopt home working models, often overnight. While some had prepared for such an eventuality – albeit with the expectation that any such disruption would be short-lived – others had to act fast to adjust their processes and secure the equipment they needed to operate from home offices. And for many, school and nursery closures meant that work had to be balanced with childcare and home learning responsibilities.
As if this wasn’t challenging enough, treasurers have also had to navigate numerous obstacles that have arisen during the course of the crisis, including securing access to liquidity, mitigating soaring cybercrime threats, managing FX in volatile conditions and addressing supply chain disruptions. Some companies, notably those in the aviation and hospitality sectors, have faced particularly severe challenges, while others have seen customer demand ramp up rapidly. As Jack Spitzer, CFO of health and wellness company Plexus Worldwide, comments: “We have had a strong surge in sales during COVID, so it has forced us to look further into how we can better handle spikes in volume from order to fulfilment to customer support.”
As 2021 approaches, treasurers are not only continuing to navigate the specific challenges brought by the pandemic itself, but are focusing on a wide range of treasury initiatives, from automating processes to exploring opportunities for sustainable financing. Matthew Davies, Head of Global Transaction Services (GTS) EMEA and Global co-Head of Corporate Sales, GTS at Bank of America notes that the challenges in the year ahead can be divided into three: “There are going to be the priorities that are a direct result of COVID-19; the priorities that are a by-product of COVID-19 – such as the macroeconomic environment – and the priorities that come under the heading of business as usual, including topics like risk management, working capital management and rationalising banking structures.”
While not exhaustive, the following are some of the areas that treasurers are expecting to focus on in the coming year.
Unsurprisingly, businesses are expecting further disruption in 2021 as a result of the pandemic. Carl Sharman, Director, Financial Advisory at Deloitte, says a recent CFO survey carried out by Deloitte highlights that the COVID-19 pandemic is set to have the highest negative effects to their businesses over the next 12 months, with 75% of respondents expecting either ‘significant’ or ‘severe’ impacts. “Interestingly this compared with only 23% expecting the same level of negative effect caused by Brexit,” he says. “In comparison, 72% expect the negative effects for Brexit to be at either ‘mild’ or ‘some’, which highlights a significant shift in emphasis.”
But while the challenges of COVID-19 are set to continue in 2021, it’s likely that the focus will be somewhat different. Davies notes that while 2020 was a year of adjusting to the new environment and protecting the business, the emphasis in 2021 will be on “getting back to a forward-looking view of how to position the company for the future.” He adds, “That means making sure the right architecture, processes, structures and teams are in place to deal with an environment that continues to be highly uncertain.”
In the meantime, Sharman says that treasurers are “likely to be pushed into the fast lane” next year as developments take hold, with cost reduction and increased cash flow coming into sharper focus. “It is also highly likely that reducing leverage will become critical for many businesses and sectors, with asset disposal and debt/equity restructuring playing a major role,” he says. “Already the signs are there for next year’s budgets to have increased spend in software, data and IT/automation compared to pre-pandemic plans, in many cases offset by a marked decrease in land, buildings and workspace infrastructure spending, as businesses begin to re-jig their priorities.”
Alongside an abrupt transition to remote working models, technology has risen rapidly up the treasury agenda. Some treasurers have accelerated their adoption of treasury management systems, fraud prevention software and cash forecasting solutions in the quest for greater visibility and control – although in other cases, technology initiatives have gone on the back burner as more pressing priorities have emerged. As Enrico Camerinelli, Senior Analyst at Aite Group, points out: “On the one hand, the pandemic has pressed the pause button – a lot of people are stopping and thinking about what comes next. But the other comment I’m hearing is that the pandemic has accelerated some decision processes that were already there.”
The current climate may also have brought a shift in focus when it comes to the type of technology investment companies are focusing on. Deloitte’s Sharman says that before the pandemic, “spend may have been focusing on the competitive advantage and development areas of machine learning, automation and predictive analytics – but now it may be more concentrated in doing the basics well in terms of remote working.”
He adds that this may “put the treasurer at the heart of the recovery”, with robust payment processes, cash visibility and heightened risk management emerging as “core business-critical candidates for being enabled by the latest technology platforms, with corporates focusing less on marginal gains and more on protecting avoidable losses.”
Mark Smith, Head of Treasury and Trade Solutions EMEA at Citi, says a major focus in recent months has been on building resilience in order to manage business disruption. “It’s about being able to run your systems and platforms, connect with clients and enable them to continue serving their customers,” he says. For corporate clients, he says the crisis has acted as “a catalyst to investment and digitisation,” and has led to greater adoption of initiatives that can automate manual processes.
In this environment, banks are seeing significant uptake of their digital services. Bank of America reported in a Q3 press release that CashPro Mobile active users have increased by 39% in the last 12 months, while the value of payments approved using CashPro Mobile has increased by 111% year on year. “Clearly clients are embracing the opportunity to do more through digital capabilities,” says Fernando Iraola, Head of GTS LatAm and Global co-Head of Corporate Sales, GTS at Bank of America. “I see this as one of the opportunities to come out of this crisis, and this will continue in 2021.”
Smith, meanwhile, says that over 75% of Citi’s account opening can be carried out using digital onboarding capabilities. “We’ve been incredibly focused on our digital onboarding, and working out how we can make doing business with us easier,” he comments. “It’s not about having reams of unnecessary legal documents, but about having the pertinent ones that are necessary, and then offering digital onboarding.” He also cites the growing take-up of API connectivity to initiate payments, check balances and send queries.